Suppose you are 30 and have a $100,000 face amount, 20-year, limited-payment, participating policy (dividends will be used to build up the cash value of the policy). Your annual premium is $900. The cash value of the policy is expected to be $4,000 in 20 years. Using time value of money and assuming you could invest your money elsewhere for a 7 percent annual yield, calculate the net cost of insurance. Use (Exhibit 1-A, Exhibit 1-B, Exhibit 1-C, Exhibit 1-D) Note: Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Round time value factor to 3 decimal places and final answer to the nearest whole number. Net cost of insurance $27,361
Suppose you are 30 and have a $100,000 face amount, 20-year, limited-payment, participating policy (dividends will be used to build up the cash value of the policy). Your annual premium is $900. The cash value of the policy is expected to be $4,000 in 20 years. Using time value of money and assuming you could invest your money elsewhere for a 7 percent annual yield, calculate the net cost of insurance. Use (Exhibit 1-A, Exhibit 1-B, Exhibit 1-C, Exhibit 1-D) Note: Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Round time value factor to 3 decimal places and final answer to the nearest whole number. Net cost of insurance $27,361
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Suppose you are 30 and have a $100,000 face amount, 20-year, limited-payment, participating policy (dividends will be used to build
up the cash value of the policy). Your annual premium is $900. The cash value of the policy is expected to be $4,000 in 20
years. Using time value of money and assuming you could invest your money elsewhere for a 7 percent annual yield, calculate the net
cost of insurance. Use (Exhibit 1-A, Exhibit 1-B, Exhibit 1-C, Exhibit 1-D)
Note: Use appropriate factor(s) from the tables provided. Do not round intermediate calculations. Round time value factor to 3
decimal places and final answer to the nearest whole number.
Net cost of insurance
$27,361
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